【The Trading Edition】 Episode 4: Do Charts Drive You Crazy? The Psychiatrist Explains the "Herd Mentality" and the Ultimate Defensive Tactics ⛴️?

In the previous installment, I talked about how the market is crowded with “greedy pigs” and “sheep who follow others.”

This time, why do we, like sheep, get swept up by the “crowd” and lose calm judgment? I will delve into that terrifying mechanism.

“There was a pre-decided rule, but the moment price suddenly moved a lot, I couldn’t help but jump on it…”

Anyone who has had that kind of experience, right? Actually, this isn’t because your willpower is weak; it’s caused by human “instinct.”

? We are programmed to “migrate” to the crowd

Dr. Elder explains that the reason we want to join the crowd comes from survival instincts of the Stone Age. Long ago, humans formed groups for safety. Individuals acting alone were more likely to be eaten by saber-toothed tigers, and the tendency to join the group is embedded in our genes.

In modern times, beneath a thin veneer of civilization, we still carry primitive impulses. When placed in an environment filled with market anxiety, we instinctively seek safety and want to join the “crowd (the vast majority of other traders).”

? The true face of the market’s crowd “leaders”

The crowd always seeks a leader. Then, in a world where no one faces each other, who is leading the crowd?

That is, “price.”

Price itself is the leader of the market’s crowd, speaking to us through its small fluctuations. For example, when the price begins to rise sharply after we have bought, we feel more confident and enveloped in happiness, as if rewarded by a parent. Conversely, when the price moves against us, we panic, see others dumping, and we too are driven to dump in fear.

While we are distracted by the movement of the price (the leader), we forget our own plan entirely and become completely swallowed by the crowd’s emotions.

⛴️ The Odyssey’s chain that prevents disaster

When swept up in crowd psychology, you lose your original plan and end up losing capital. No one can control the market, but you can control your own “position size” and your rules for entry and exit.

So, how can you resist the price’s lure, the leader? The doctor quotes the Greek myth hero Odysseus.